Andrew Bell’s Market Wrap: What are the regulators up to?

Issue 13 | Thursday 1 July 2021 | What are the Regulators up to?

Hi, Andrew Bell here and a warm welcome from the Gold Coast as we enter the midyear School holiday season, which is always a very busy time here on the Gold Coast.

The talk of the country is still very much on the real estate market. I don’t know how many people are aware, but Australia has recorded the fourth-fastest house price growth out of the world’s advanced economies over the past 20 years, according to a new report by the Organisation for Economic Co-operation and Development (OECD).

Add to that, local households are the second-most indebted in the world and it takes six years longer to afford a home in Australia at 16.4 years of disposal income for a 100-square-metre dwelling versus 10.4 years for the OECD average.

Houses are selling at a record pace, the number of homes selling above asking price is at an all-time high, and values are surging to new levels.

Dwelling prices over the year jumped by 10.6 per cent nationally – the strongest annual growth in almost 11 years.

We know record low interest rates and the closing of our borders that is directing monetary spending within Australia are unique factors that are driving our market, but buyers are also suffering from ‘Fear Of Missing Out’ syndrome like never before. They see the market going up and want to be in and part of it, whilst sellers appear to be suffering from the same phenomenon in a different way – that is, they have expectations that prices will keep going higher, so they are delay selling. There is some reality to the fact that so many of our potential sellers at present say they would sell if only they could find an alternative property to buy. It is the old horse and cart situation.

There are a few factors that will start to come into play. One is housing affordability where people just can’t afford to borrow more money to pay higher prices, but we are already starting to see banks of their own accord raise the qualifying for a home loan on the assumption that interest rates will be higher in a couple of years’ time.

There is rising speculation that by October 2021 there will be macro-prudential policy tightening that is likely to come into effect because that is when the Council of Financial Regulators are due to meet and when the Reserve Bank of Australia releases their Semi-Annual Financial Stability review. If the market hasn’t cooled on its own accord, there is likely to be some regulative measures put in place to force that cooling effect.

An example of the tightening in listings that are adding to the boom in the real estate market was Core Logic’s estimate that in the three months to May 2021, there were about 164,000 dwellings transacted across Australia. However, in that same period of time, just 136,000 new properties came to the market and so that is just one clear example of how stock levels are tightening quarter after quarter.

In the long term, there will have to be a greater focus on restrictive regulations that are in place; freeing up the supply of new housing to the market given that we are likely to see a significant number of expats returning to Australia and as immigration gets back to normal levels. Unless we can free up more land for development then there is just going to be this constant pressure on housing prices.

Looking at the Gold Coast and we see we have recorded the biggest single year jump since the highs of the mid 2000’s boom. That information comes from Core Logic that showed values increased 15 per cent in the year to April 2021, which was the highest since 2006 and was just below the record seen in 1986 and again in 2001. Whilst we expect to see migration from interstate continuing at strong levels for quite some time, we will also see demand rising should we win the hosting of the 2032 Olympics that will see a huge investment in Southeast Queensland and reaffirming that Southeast Queensland is the place to be for the next 10+ years. Out of interest, Core Logic data shows that the average Gold Coast property is worth $638,000 and that is now higher than Brisbane at $538,000.

In my 45+ year experience, I have certainly known that markets don’t keep booming forever and once a bucket of cold water is thrown on it, it is a completely different landscape. So, for those sellers thinking of selling, think hard about whether there is a risk that in hoping to squeeze a few more dollars in price growth you don’t actually miss the boat altogether and find you are in a cooling market.

Have a good look at the wonderful array of listings we have on offer at present. We are offering most of them to auction so that everyone can have a fair opportunity to secure the properties rather than off market transactions where there is no open field. An equal chance for all.

A quick thank you to all of those who were generous enough to support by way of donation to the Gold Coast’s CEO Sleepout. There were just over 200 people who raised over $600,000 for the homeless and that will go into buying a location to be able to house increasing numbers of the homeless. Money well spent for long-term benefits. Thank you.

I look forward to being with you in a fortnights time.

Warm Regards,

Andrew Bell, OAM
Chief Executive Officer
The Ray White Surfers Paradise Group

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